Euronext Dublin has published the first Irish Corporate Governance Code (the Code) which  sets out a series of principles aimed at guiding companies in their governance practices and more detailed provisions that support the application of the principles.

Who does the Code apply to?

The Code will apply to Irish incorporated companies with an equity listing on Euronext Dublin for financial years commencing on or after 1 January 2025.  Where a company is dual-listed in both Ireland and the UK, it has the option to either follow the new Code or the UK Corporate Governance Code (the UK Code).

“Comply or Explain”

The Code adopts a “comply or explain” approach.  The company must state clearly and concisely in its annual report how the principles of the Code have been applied and whether the company has complied with all relevant provisions.  Where a company has not complied with the Code’s provisions, it must report on the nature, extent and reasons for non-compliance.

Alignment with UK Code

Historically, companies listed on Euronext Dublin have reported, in accordance with the Euronext Dublin Listing Rules, against the UK Code on a “comply or explain” basis.  The new Code is based on the UK Code, adapted for the Irish market and legal environment, including the broader EU regulatory regime. Some of the aspects in which the Code diverges from the approach under the UK Code include:

• Shareholder Engagement: The threshold for addressing shareholder votes against a board recommendation under the Code is 25% (compared to 20% under the UK Code) to align with the threshold for special resolutions under the Companies Act 2014. The Code requires that the board detail the engagement process undertaken to consult with shareholders, but the requirement for publication of a six-month shareholder update under the UK Code is not included.
• Key Stakeholders: The board should describe in the annual report how the views of stakeholders and the interests of the company have been considered in board discussions and decision-making. The board should also explain the arrangements in place for engagement with the workforce together with a requirement to review its Speaking Up policy, however the prescribed method of engagement with the workforce under the UK Code is not included.
• Director Independence: The criteria likely to impair a director’s independence from being an employee of the company refer to “within the last three years” (the UK Code refers to the last five years).
• Role of Company Secretary: The Code includes more information to reflect the role of the company secretary in corporate governance, noting that information flow within the board and its committees and between management and non-executive board members is under the direction of the chair.
• Board Skill, Knowledge & Experience: The Code provides that the nomination committee should use the results of the board performance review to identify and prepare a description of the skills, knowledge and experience required on the board as part of the appointments and succession planning process. Where the requisite skills and expertise are not available on the board, the board should ensure that it has access to such expertise and skills.
• Diversity & Inclusion Policy: The company should have a diversity and inclusion policy regarding gender and other aspects that are of relevance to the company, which includes measurable objectives, and it should be reviewed annually.
• Audit Committee: At least one member of the audit committee should have “competence in accounting or auditing” (rather than “recent and relevant financial experience” under the UK Code). The role of the audit committee includes monitoring the “corporate reporting process” (rather than the “financial reporting process” under the UK Code).
• Risk & Internal Controls: This wording of this provision aligns with the Companies Act 2014 by referring to “internal control and risk management systems”. The new provision in the UK Code, requiring more prescriptive disclosures regarding the risk management and internals controls, is not included.
• Remuneration: Share awards should be subject to a minimum vesting period of three years (compared to five years under the UK Code). The Code provides that a description of a company’s malus and clawback provisions be included in the annual report, however it does not include the new UK Code Provision 38 on malus and clawback, as Euronext Dublin believes that it is too prescriptive.

How we can help

Should you be in scope, your next step should be to undertake a detailed gap analysis between your current governance arrangements and the Code ahead of the 1 January 2025 deadline.

To discuss how we  can support you in conducting your gap analysis and taking any corrective actions needed, please contact Golda Hession, Of Counsel, Corporate M&A, Ciaran Flynn, Head of Governance and Consulting Services or your usual Arthur Cox contact.